11 Things to Know Before You Lease a Car
If you are in the market for buying a car, you may consider leasing one. A survey indicated that nearly one quarter of new cars sold are on the lease agreement. A lease has a lot of advantage and although it may seem surprising to many buyers leasing a car is actually a good idea.
Here are 11 things that car dealer won’t tell you. These are things you should keep in mind before you go for the actual process.
Better Credit Card Score
We have all heard of a better credit score when applying for a loan. But while leasing a car too you require an excellent credit score. These act as an indication of your vulnerability. Regular bill payment, timely payment is all necessary for a good score. Make sure you pay off debts in anything involving a credit card. You should also apply for a new credit account only when needed. This is criteria for a good credit score and maintains a good credit history.
Hard to Get A Loan
Most banks and financial companies don’t offer credit for car leases. Hence customers are forced to use captive financial services for payment. For customers who have a high credit score, getting a loan, whether it is a purchase loan or lease loan, it is no problem at all. But customers with low credit can find themselves stuck in these financial services with high interest rates.
Leasing is cheaper
Leasing a car can be cheaper if paid up front. Even if you pay monthly, leasing a car involves less monthly payment than purchasing a new one than you get an estimate about price by calculating online in a used car lease calculator.
You Can Negotiate A Lease
Unlike car loans, you can negotiate a lease. Anyone who tries to lease negotiates the capita cost from the car manufacturer. If you have a good credit score, negotiating can be all the more beneficial. You can save some extra bit by eliminating small fees, like documentation fee and more. Even if the dealership agencies offer discounts and price cuts, negotiating can still be done.
Down Payment is Not Required
One advantage of leasing a vehicle is that the depreciation risk is borne by the manufacturer and not the customer. In some cases, there is no down payment and even if there is it is a form of pre-payment, which does not harm the customer. However, always try not to put any payment down.
Extra Insurance Cost
Leasing generally involves lower monthly payment but you get happy, you must also know that leasing involves higher insurance costs. In order to receive financial protection, lessees take up extra insurance than traditional car insurances. If a car is totaled or stolen within the lease period then you have the advantage as insurances cover this part too. This extra insurance adds up to 3-10 percent of your overall cost.
Every person who undergoes a lease is subjected to three types of payment. The first fee is called an acquisition fee or a financing fee. Lessees need to pay this fee upfront when visiting a car dealer. You must take care as many dealers try to add a second fee as a delivery charge for the cars. This fee can be negotiated and opted out completely. The last fee involved in it is a deposition fee or a purchase option fee. In addition you these you can also face a mileage average fee, depending on your dealer. This is generally applicable to luxury vehicles and not regular ones. You can also use a used car lease calculator for this purpose.
Most leases last for three years and hence come under a period of warranty. During such periods the dealers also take care of the repairs that the car undergoes. Some warranty includes basic maintenance while other dealers can charge extra for oil changes and tire rotations.
Returning a leased vehicle early is like defaulting on a car loan. No matter how early you return, you will still owe the dealer the payment that is agreed on. When your lease is ending, you need to decide whether you would purchase a car or return it. If you have instant cash, then you can purchase the vehicle upfront but in case you take the help of financing services, again the extra cost will be involved.
Limit the Distance
If you are a frequent driver and take up long commutes then a lease might not be a good option, because driving over the agreed limit will involve extra charges.
Lastly, if you are someone with a midterm vehicle needs, leasing is best suited for you. If you like driving new and fancier cars and can afford monthly payment then leasing is your best friend.